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Kroger at home with innovation

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Chris Baldwin kicked off the National Retail Federation’s Big Show in New York City earlier this month by assuring attendees at the event’s first Main Stage presentation that rumors of the industry’s “demise were greatly exaggerated.” The chairman, president and chief executive officer of BJ’s Wholesale Club and current NRF chairman then elaborated on his paraphrase of Mark Twain: “I would love to say that retail is back, but that would be wrong. Retail never went away. As I stand here today, I can say that our industry is more healthy, vibrant, innovative and exciting than ever.”

He went on to cite several industry leaders and their companies who are reimagining the business — Doug McMillon and Walmart; Brian Cornell and Target; Miki Racine Berardelli and KidBox; Greg Sandfort and Tractor Supply Co.; Jeff Gennette and Macy’s; Marla Beck and Bluemercury. One such pairing that would be right at home on the list is Rodney McMullen and Kroger.

Not all that long ago the nation’s biggest operator of traditional supermarkets was a conservative organization, content to chalk up quarter after quarter of comparable-store sales increases and expand via the tried-and-true method of acquiring other grocery chains. That situation has changed considerably since the company in October 2017 launched Restock Kroger, an initiative designed to do nothing less than redefine the food shopping experience in this country.

“We understand that today’s marketplace is shifting rapidly,” McMullen said at the time. “Kroger’s success has always depended on our ability to proactively address changes by focusing relentlessly on our customers. We have the scale, the data, physical assets and human connection to win. Combing our food expertise and data analytics uniquely positions Kroger to create new and highly relevant customer experiences, delivered both digitally and in stores.”

The company has moved with impressive alacrity to deliver on that promise, forging partnerships with technology providers and other retailers to accelerate its evolution. McMullen took the stage at the Big Show on the same morning that Baldwin spoke to provide an update on Kroger’s progress on the ambitious journey it has ­undertaken.

Kroger McMullen

Kroger chairman and CEO Rodney McMullen delivers a keynote presentation moderated by CNBC anchor Sara Eisen at NRF 2019: Retail’s Big Show in New York City.

“Our vision is to serve America through food inspiration and uplift,” he said. “We’re transforming Kroger from a grocery company to a growth company.” In order to do so, Kroger must enlarge the scope of its vision and invest in new capabilities, including the skill set of its store associates.

“People will always eat,” noted McMullen, “but the way people eat will always change. To grow the business you have to think about the data — the customers coming into the store or online — and how do we use that data to help the customer better, then create some new business opportunities, including media partnerships and other things.”

Equipping Kroger to compete effectively in the new marketplace requires a new business model, one that seamlessly melds the retailer’s existing strengths in the brick-and-mortar world with a growing range of digital tools. McMullen reminded his listeners that the task can’t be completed overnight.

“You really have to understand where it is you’re trying to get to, what are the things that you’re better off doing on your own, and what are the things that you can partner with others on,” he said. “So if you think about customers, they want anything they want, anytime they want it, anywhere they want it.”

To satisfy the expectations of omnichannel shoppers, Kroger is moving to expand its own ample expertise and robust resources in food and the grocery business, with the complementary assets of such partners as Ocado, Microsoft and Walgreens Boots Alliance.

Kroger and Ocado, one of the world’s biggest online food retailers, are working to bring the latter company’s proprietary technology to a series of distribution centers that will power the former’s e-commerce business in the U.S. The first of the facilities, a 335,000-square-foot warehouse costing $55 million, is under construction in Monroe, Ohio, close to Kroger headquarters in Cincinnati. McMullen told Big Show attendees that the sites of the next two DCs will be announced in the near future, adding that, if it had developed them on its own, it would have taken Kroger five to 10 years to match the capabilities that Ocado is providing.

A new partnership with Microsoft will similarly give Kroger quick access to tools that it — or any traditional retailer — would be hard pressed to create. McMullen said that representatives of the two companies identified opportunities where they could help each other, including the ability to curate the retail experience for the supermarketer’s customers.

A smart technology system developed by Kroger and driven by Microsoft’s Azure cloud and Internet of Things devices is being put to the test in two pilot stores, in Monroe and in Microsoft’s home base of Redmond, Wash. “Both of us are entirely focused on how do we do something for customers they can’t get elsewhere,” noted McMullen. “How do we use the technological expertise and intellectual capacity to accelerate what we’re doing.”

Under another deal, with WBA, Kroger customers can pick up their grocery orders at 13 Walgreens drug stores in northern Kentucky. In a subsequent extension of the original pilot program, shoppers at those locations can take advantage of Kroger Express, a curated assortment of 2,300 items, while Home Chef Express meal kits are now available at 65 Walgreens stores in greater Chicago.

Asked whether the timing of so much groundbreaking activity at Kroger is propitious, McMullen answered, “I don’t think there’s ever an easy time to do these things, but I always tell people, once you can obviously see it, then it’s too late. So you better be predicting and anticipating where the customer is headed.”

Like National Hockey League  great Wayne Gretzky, who famously said that “you have to skate to where the puck is going, not where it has been,” McMullen and Kroger have a clear understanding of what it will take to stay at least one step ahead of the competition.


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